Banking in the Digital Age: It is Technology Plus…
By Dr B K Mukhopadhyay
In this age of innovention – innovation plus invention - fast changing techno-savvy world - the buzzword is there - strengthen the marketing team and at the same time the very effectiveness so that the market share is broadened overtime following a set of strategies that are customer- centric and at the same time risk-centric in approach. To achieve the same continuously changing business environment is required to be given appropriate weight age in as much as retaining the customer emerges to be the biggest challenge all over the banking world now and for that matter following a renovated strategy [ e.g. a joint- drive like inter-institutiol ] could strengthen the base.
Obvious enough the banks have learnt a good lesson from the recent recessiory experience. As the incidence leaned heavily on failure of the interl risk magement system, the banks have become much more cautious compared to previous days. It is also a fact that the risk magement practices have been there previous to such incidences. But as of now they look more seriously before the leap. Current trends are also reflecting departure from traditiol practices in a number of ways – auditing is attached more importance [compliance is taken seriously than before], switching over to the base rate regime, interest rates being revised more frequently responding to changing market situations, risk magement practices being widely understood. The banks are more cautious about customer dealings.
Though as a whole the trends are encouraging, yet regarding magement of assets and liabilities a lot of things are to be done – the assessments made more specifically especially keeping in view the newer risks factors and so also so far as talent retention strategy is concerned [some of the India’s small banks still miserably failing on this score mainly because of lack of vision, leadership styles and the like].
Back home – our players are registering good going with profit levels going up and more stronghold over the fast changing market situations. Of course the best players, among others should not merely restrict to the profit figures but shouldering more responsibility to discharge functions that directly and indirectly pushes the contributions from this banking sector to the GDP. The renewed emphasis on the MSME Sector could invite more entrepreneurs in the field along with the existing players – more transactions in the CD wing are reasobly expected. So the CASA section is expected to ensure sustaibility.
The branch expansion drive even by the minnows since initiated is also another area, which could help sustain the growth process via extending fresh services to the rapidly growing urban / suburban settlements.
Providing new / improved services vis-à-vis meeting customers’ needs at lower costs that are being followed could help protect deposits growth moving south. Innovations could exert a considerable competitive impact on other banks.
Since quality has become a commodity quicker customer-friendly-environment backed services hold the key on this score. There of course remains a high possibility of netting more deposits from the public as the economy is moving north steadily especially when the last Central budget has emphasized more on the investment in infrastructure and rural development, which, in turn, could result in more business activities in all of the regions – metropolitan, big cities, small cities and the semi-urban / rural regions. Much depends of course on how the inflatiory forces are tackled during this fiscal.
Well-maged, aggressive branches are sure to attract an increasing proportion of the banking business in a particular region while at the same time boosting efforts towards retaining the existing customers should be beefed up. It is crucial to provide bank customers with a pleasant environment and turally the look must be for improving ways related to the service quality. It is for enhancing customers’ experience – the value proposition that is given is relationship – the sort of relationship magement that gives the persol attention they would not typically get from the larger competitors.
This is reality, which necessitates technically competing with a human touch in a way where the actions and responses could become more customers centric and better result yielding.
Recent evidences suggest that fince is not only pro-growth, but also pro-poor and economies with better developed fincial systems experienced faster reductions in income inequality and poverty. For ensuring fast and consistent economic and social development a well functioning fincial system is an essential pre-requisite and so also the depth, capability and efficiency of the fincial system. Appropriate fincial sector policies calls for encouraging on the one hand competition and provide the right incentives to the individuals and on the other extending necessary support to foster growth, poverty reduction and better distributive justice making full use of the capacities. Improving fincial access in a way that most benefits the poor calls for adoption of strategy for inclusion that travels well beyond credit for poor households and as such it is vital to broaden the focus of attention to improving access for all who remain excluded
In fact, crisis period calls for a careful assessment of the causes, effects as well as the future plans and as such any sort of complacency is out of question. What is more under the ongoing scerio - especially keeping in view the fast changing banking scerio – where a particular technology is being replaced rapidly by another technology - it is better to take for granted that in the near future there would be intense competition – intra and inter [players being Government owned banks, old private sector banks, new private sector banks and foreign banks] not only at the macro- level, but at the very micro-level also. turally, fixation of strategies, continuous up gradation of skill and making best use of talent backed by effective planning techniques that take care of the forthcoming series of happenings / things, pose the biggest challenge. Thus the future is for them who emerge to be top risk magers through optimal utilization of all of the resources – physical, fincial, technological and the most important one – the human resource.
The need is very much there to follow a defensive marketing strategy as well so that the aging building does not suffer from unnoticed pilferage. Business boosting does not have any short cut formula. Reality is something where one has to keep pace with the changing needs and thus correcting the strategies to be followed. What is more, one particular strategy is not going to necessarily give lasting success. As the very term strategy is borrowed from military science – the process followed should adhere to the situation warranted.
In fact stability and resilience during fincial turbulence is to be rigidly watched and practiced. Dr Rangarajan, former Governor of Reserve Bank of India is very correct in saying that with judicious action plan India can weather the storm earlier than others. The Committee on Fincial Sector Assessment [CFSA] clearly stated that the banking system had not exhibited any significant vulnerabilities and cautions against any sort of complacency. Bankruptcy proceedings need to be reformed for effective enforcement of creditor rights and for enhancing creditor’s confidence-level in the matter of contract enforcement.
Again, merger-amalgamation process must be goal oriented. The regiol rural banks have been merged to form a single entity: has it solved the problem of non-recovery of loans, profitability, employee productivity or best utilization of manpower? Simply asking banks to merge does not serve any purpose if the objectives are impractical.
It remains also a fact that privatization alone cannot solve the banking sector’s problems. If the public sector banks go on showing a growth trend why not to encourage them. A better coordition between the players would be beneficial since both the sectors have plus minus points. Synergy ebles the banking sector to counter the foreign players effectively. When we cannot stop their coming into our land then why not to face them in such a manner exactly what the Japanese counterpart does [to an average Japanese the Japanese Bank is the first preference]. Yes. Obviously the level of customer delighting is the key factor.
Time is ripe for taking achievable, target oriented strategies so that the banking sector earns better respect from foreign customers as well. Techno-savvy ture is one part of the game. Talent search, competent board members, corporate governce, flexibility in decision making, updating of knowledge through continuous training system, borrowing the knowledge from the biggies, concentrating on pure banking activities, etc. could definitely eble the India’s banking sector to offer a tough fight to the foreign counterpart.
It must be admitted that India’s banking sector has been weathering the storm well, still the scope for further improvement is always there and before spreading the wings the indigenous operations must be able to protect the storm otherwise markets already grabbed and consolidated would be slipping out over time. In today’s world slow and steady is better quickly replaced by the fast and consistent players.
(The Writer, a noted Magement Economist, an Intertiol Commentator on Business and Economic Affairs and Director, Netaji Subhas Institute of Business Magement, Jharkhand, India, can be reached at email@example.com)